Contrary to common misconception, operating online doesn’t eliminate all business risks typically covered under commercial insurance policies. Whether you run an online store or offer professional services via a website, you face unique risks and hazards that many other business owners face daily. Understanding “why online businesses need insurance” is crucial for owners to avoid paying costly claims out of pocket.
Why Online Businesses Need Insurance?
Even if your business is web-based, you may operate from a physical office you own or rent. Also, you probably own or handle physical or digital property that could be lost or damaged, such as customer data or inventory. In any of these scenarios, it is a good idea to have proper insurance coverage. Your digital footprint, including your social media profile, and emails, expose you to unique covered risks. Claims can arise from issues such as:
- Hackers breach your online payment system and steal your customer’s credit card information
- You’re sued for copyright infringement after using someone else’s photo
- A client sues your business for breach of contract
- Online businesses need insurance to cover costs associated with such claims
Here are some insurance policies that online businesses need:
Cyber liability insurance
This insurance policy covers any data breach affecting your online business. It can pay for costs like:
- Notifying customers affected by the breach of sensitive personal information
- Credit monitoring services
- Public relations exercises
Business owner’s policy (BOP)
It combines multiple coverages, including:
- General liability insurance for bodily injury and property damage claims
- Commercial property insurance to compensate you for theft or damage of business property like physical buildings, inventory, and equipment
- Business interruption insurance to cover lost income and payroll expenses when you halt operations due to a covered loss like fire damage
Product liability insurance
This insurance policy is important if you’re an online retailer. It can protect your business if you sell a product that hurts the user or damages their property. A defective battery that overheats, explodes and burns the customer is a typical example of a product liability claim. It’ll cover your legal defense costs and compensatory damages awarded to the affected customer.
Professional liability insurance
Also called errors & omission insurance, this policy can cover you if you provide professional services online. Let’s assume you’re an online marketing consultant. A B2B client sues you for selling them a marketing plan that allegedly triggered revenue losses. Professional liability insurance would protect you even if you did nothing wrong. It could pay for legal representation in court and any settlement awarded to the client.
Workers’ compensation insurance
If you have any employees working for your online business, you should have workers’ compensation insurance. The policy will provide benefits to employees injured on the job. Business owners with employees are required to carry this coverage in most states.
Commercial auto insurance
Your personal car insurance may not cover auto accidents involving your car in business-related errands. If you or your employees use your personal vehicle for work, such as deliveries, you should consider getting a commercial auto insurance policy. It can provide protection against property damage if you are involved in a car accident while driving for business.
How to Obtain Commercial Insurance for Your Online Business
An independent insurance agency can help you find comprehensive protection for your digital venture. To learn more about commercial insurance, contact us at Singh Agency right away. Our agents are happy to answer your questions about getting a custom online business insurance policy.